Newmont Corp. (NEM:NYSE) unexpectedly significantly revised its operating outlook during its recent Q3/24 earnings conference call, and on the news, Jefferies lowered its target price on the gold miner by 14% to $57 per share from $66, reported equity analyst Matthew Murphy in an Oct. 24 research note.
"We think this sort of guidance revision will shake the market's faith in the outlook and impact the multiple," Murphy wrote. "The only saving grace is that gold prices remain well above consensus and have strong momentum."
Target suggest 15.7% upside
Newmont's current share price is about $49.25, noted Murphy. As such, the new target implies a 15.7% return for investors.
The company remains a Buy.
Changes to the model
During the conference call, Newmont noted it now expects lower production and higher costs in 2025 than it previously did, a "disappointing" turn of events, Murphy wrote. Management guided to production from the company's 11 core managed and unmanaged assets (excluding assets held for sale) of about 5,600,000 ounces (5.6 Moz), less than Jefferies' previous projection of 6.2 Moz. Therefore, the capital markets firm reduced its 2025 production estimate to a 2024 amount. Ventum also aligned its model with Newmont's longer-term operating estimates of 6 Moz of gold and 150,000 tons of copper.
Regarding costs, Newmont managed indicated it expects Q3/24 cost pressures to extend into Q4/24 and next year. Consequently, Ventum modeled an all-in sustaining cost (AISC) of about $1,315 per ounce for the next couple of years for Newmont's managed assets, an amount consistent with its Q4/24 expectations and in line with the miner's guidance.
For the entire asset portfolio in Q4/24, Ventum models an AISC in line with Newmont's Q4/24 guidance of $1,475/oz. This includes ~$1,337/oz for the core assets, $1,312/oz for the managed assets and $1,407/oz for the unmanaged assets. Ventum maintained production and cost estimates for the Nevada Gold Mines joint venture, the Pueblo Viejo joint venture and the Lundin Gold equity contribution. Ventum raised capex over the next few years to about $1.8 billion per annum, an amount consistent with Newmont's guidance.
Ventum is still modeling cost improvement, but it is higher than what Newmont guided to in February.
"We do think changes in the asset mix will drive lower firm AISC, and we are also modeling a cost environment consistent with our $2,300/oz long-term gold price," wrote Murphy.
What to watch for
Several events could catalyze Newmont's stock, Murphy wrote. One is the gold price moving higher. Others, which are internal, include the company making progress on divesting of assets, realizing synergies from the Newcrest acquisition and providing better clarity on its asset-level operating plans.
"This quarter was a blow to confidence, but we still expect operational improvements versus Q3/24, asset sales and buyback," Murphy wrote.
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